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AMSTERDAM -- Ahold here said yesterday that it has agreed to sell its scandal-plagued American unit U.S. Foodservice to a consortium of private equity firms Clayton, Dubilier & Rice Fund VII, LP (CD&R) and Kohlberg Kravis Roberts & Co., LP (KKR) for $ 7.1 billion.
The deal is expected to close in the second half of the year, subject to the fulfillment of customary conditions, among them antitrust clearance and approval by Ahold's shareholders. News of the deal sent the company's share price up to a four-year high in early morning trading in Europe.
The retail conglomerate's supervisory board and corporate executive board are recommending that shareholders approve the sale. Shareholder approval will be sought at an extraordinary general meeting scheduled for June 19. Shareholders will receive more detailed information on the transaction before the meeting.
"We have focused on restructuring U.S. Foodservice, strengthening its capabilities, and restoring profitability," noted outgoing Ahold president and c.e.o. Anders Moberg in a statement. "The agreement we have been able to reach with CD&R and KKR is the result of the hard work and dedication of everyone at U.S. Foodservice."
"U.S. Foodservice has built one of the leading businesses in the foodservice distribution industry, with a wide range of growth and operational improvement opportunities," said KKR member Michael M. Calbert, who commended the company's management team, for "doing an excellent job of refocusing the business in recent years."
"U.S. Foodservice is well positioned in a stable and growing industry that we know well from prior investments," added Richard J. Schnall, the partner heading the transaction from CD&R. "We plan to leverage the company's strong national and local market positions in the nearly $200 billion U.S. foodservice industry to accelerate growth in both revenues and profitability."
Columbia, Md.-based U.S. Foodservice, the second-largest broadline foodservice distributor in the United States, supplies over 250,000 foodservice customers, including restaurants, hospitals, hotels, schools, the government. With 2006 revenues in 2006 of over $19 billion, its operations cover a geographic area in which over 95 percent of the U.S. population lives.
A 2003 accounting scandal at the division rocked Ahold's financial stability, which it has worked to regain through its "Road to Recovery" program and an exhaustive business review that led to the decision to sell U.S. Foodservice.
In other news, Ahold's outgoing c.e.o. Anders Moberg said the company ought to diversify its product assortments beyond food.
"We need to extend our offer into non-food, we are starting to work on it," Moberg was quoted as saying in a Reuters reports. "We will continue to work on that strategy.